Here is how to get a business line of credit in six steps.
1. Decide why you need a line of credit — and how much.
Determining why you need the credit line for your business is essential. Do you need flexible funding for inventory purchases or help to cover cash flow gaps, or is it more of a cushion for emergencies? Once you know the purpose of the financing, you can then decide how much you’ll need.
2. Evaluate your qualifications.
Online lenders may be more lenient with business loan requirements than brick-and-mortar banks. However, you will likely pay higher fees and have less flexible terms with an online lender.
If you want a secured line of credit, evaluate the collateral you can provide, such as inventory or equipment. Alternatively, your lender may require a cash security deposit, which can be refunded depending on your account performance.
Check your credit scores in advance to know where you stand. Boosting your credit now can help you secure a better rate and save more money in the long run.
3. Research lenders.
Once you know what’s out there and within your reach, it’s time to compare lenders to find the best business line of credit for your needs. Pay attention to whether the line is for a fixed term, such as 12 or 24 months, or if it renews annually.
If it offers an annual renewal, check whether there is a yearly fee, which can sometimes reach up to $175. It’s also a good idea to see if there is a required minimum payment each month.
Be sure to read business lender reviews before proceeding with the loan application.
4. Gather required documents
When applying for a business line of credit, each lender’s required documents will vary. In general, you can expect lenders to ask for a business plan, personal and business tax returns, financial statements and a balance sheet. Lenders may also have other requirements, such as a business bank account.
5. Apply
The application and approval timeline for a business line of credit can range from one day to several months. For example, Bluevine states that you can receive a decision in as little as five minutes, whereas Wells Fargo can take up to two weeks.
Most lenders will outline the timeline so you know when to expect funds. You may need to provide additional paperwork and documents after submitting the initial application, but your lender will guide you through the process.